Oare they sick or won’t they? On or off? When deciding whether to be fully invested in the stock market or to enter the market, many investors try to anticipate the Federal Reserve’s next interest rate decision. The volatility in the market, where stocks seem to lack direction and conviction, suggests that investors are still undecided about inflation and what the Fed will do to combat the rising cost of living.
After stocks fell Thursday on fears the Fed might need to raise rates, stocks closed mostly lower on Friday, with the Dow Jones Industrial Average and S&P 500 posting weekly losses. But Friday’s session didn’t end as badly as it started, with the Dow Jones opening with a loss of more than 300 points. The surge in wholesale prices, released on Thursday, signaled that inflation was not receding as quickly as investors would like, or in a way that would force the Fed to abandon its hawkish stance.
The broad consensus among Wall Street analysts is that the Fed at its March meeting will raise rates an additional 25 basis points, as it did at its last policy meeting. However, there is a feeling that the rise could reach 50 basis points. It remains to be seen what the ultimate increase is (assuming there is an increase, which admittedly seems very likely at this point). But concerns eased as trading continued, allowing not only the Dow Jones to move back into positive territory at the closing bell, but also the Nasdaq and S&P 500 to pare their losses.
The Dow Jones rose 129.84 points, or 0.4%, ending at 33,826.69, while posting a weekly decline of 0.1%. The Dow was powered by healthcare giants, namely UnitedHealth (UNH), Amgen (AMGN) and Johnson & Johnson (JNJ). With declines in tech heavyweights Nvidia (NVDA), Amazon (AMZN), Apple (AAPL) and Microsoft (MSFT), the tech-heavy Nasdaq Composite Index fell 68.56 points, or 0 .58%, to close at 11,787.27. The S&P 500 fell 0.28%, or 11.32 points to close at 4,079.09. Over the week, the S&P 500 lost 0.3% and posted its second consecutive weekly drop.
Friday’s trading action is another example of what’s good for the economy isn’t always seen the same way for stocks. The good news is that the labor market remains strong, with unemployment hovering around 3% even as inflation is on the rise. However, the market’s focus on Fed policy decisions is understandable. In the meantime, as evidenced by the strong earnings reports we’ve seen, companies are controlling what they can.
Will this trend continue this week? Here are the gains I will be watching.
Lucid Group (LCID) – Post-Closing Reports, Wednesday, February 22
Wall Street expects Lucid to post a loss per share of 40 cents on revenue of $302.61 million. That compares with the prior year’s quarterly loss of 21 cents per share on revenue of $661.04 million.
One to watch: One of the key questions investors want to know as we head into quarterly results is whether Lucid’s decision to enter the EV price war will drive demand. The company announced last week that customers can receive a $7,500 electric vehicle credit with the purchase of the Lucid Air. The promotion aims to reduce the price of vehicles that do not currently qualify for the government’s electric vehicle tax credit under the Inflation Reduction Act. “We believe our customers still deserve a $7,500 credit for choosing an electric vehicle. Lucid Air owners have told us how much they love this car, from the world-class driving experience to the sleek design and inside spacious,” the statement said. “With this limited time offer, we hope to put Lucid Air in the hands of even more customers so they can experience the best for themselves. While the discount incentive may lead to increased sales, it will likely come at the expense of lower margins, hence lower cash flow. operating cash burn and capital expenditures, Lucid spent $2.4 billion in the first three quarters of 2022. One of the key initiatives for 2023 is to ramp up production and deliveries. it can achieve its growth objectives and do so profitably.
Nvidia (NVDA) – Post-Closing Reports, Wednesday, February 22
Wall Street expects Nvidia to earn 81 cents per share on revenue of $6.01 billion. That compares to the year-ago quarter where earnings were $1.32 per share on revenue of $7.64 billion.
Keep an eye on: Nvidia shares have soared in the last thirty days, rising more than 30%, against a 2% rise in the S&P 500 index. And there could be more room to maneuver, according to Vivek Arya, analyst at Bank of America. While citing the chipmaker’s potential gains from advances in artificial intelligence technology, Arya last week raised its price target to $255 per share from $215 previously. The price target assumes potential returns of 20% from the current levels of $212. Among its many enablers, Arya also referenced Nvidia’s “full stack” of accelerated silicon, systems, software and developers that positions the company to “lead the emerging generative arms race of AI.” among global cloud and enterprise customers”. In the near term, it’s about whether the company can continue to navigate weakening demand for its chips used in the gaming end market. in the games market were down 51% year-over-year, while falling 23% sequentially. However, thanks to the growing adoption of cloud-based solutions and growing hybrid working, Nvidia continues to enjoy tailwinds in its Datacenter business, which could boost its fourth-quarter revenue. will have to speak positively about its growth prospects for the next quarter and beyond.
Alibaba (BABA) – Pre-Opening Reports, Thursday, February 23
Wall Street expects Alibaba to earn $2.37 per share on revenue of $35.73 billion. That compares to the year-ago quarter where earnings were $2.59 per share on revenue of $33.71 billion.
What to watch: Since late December, Alibaba shares have enjoyed an impressive run, suggesting renewed optimism about the possibility of a rebound in China as the country emerges from its zero-COVID gloom . The stock is up nearly 20% year-to-date, against a 6% rise in the S&P 500 index from around $91 to $110. And factoring in the 2022 lows on Oct. 24 or around $58, BABA stock has soared almost 90%. Investors want to know if these gains are sustainable and if there is room for more upside. BABA’s gains were fueled by Chinese regulators eager to reopen the country’s economy, reversing their longstanding zero-Covid policy. Alibaba currently derives around 65% of its total revenue from its China Commerce segment. A bet on Alibaba’s ability to capitalize on China’s reopening seems like a good bet, especially given not only the company’s diverse revenue streams in the country, but also its cloud potential. BABA recently announced plans to invest $1 billion over the next three years to bolster its cloud prowess, and although the cloud currently represents only a small portion of its overall business, management has begun to view it as a crucial element of long-term growth and profitability. . On Thursday, the stock can continue its ascent if Alibaba can beat its top line and earnings and provide a confident outlook for the next quarter and full year.
Nikola (NKLA) – Pre-opening reports, Thursday February 23
Wall Street expects Nikola to lose 43 cents per share on revenue of $32.13 million. That compares to the prior quarter where the loss was 54 cents per share on revenue of $24.24 million.
What to watch: The main question heading into this quarter is whether Nikola has enough sustainable energy, especially with its cash burn, to sustain the high capital costs of running its business. an electric vehicle company. Although the company has met its delivery targets and appears to be on track to increase production in 2023, it is not yet clear whether Nikola has a clear path to sustained revenue and profitability. However, with several operational headwinds now removed, the route is less dangerous. On the positive side, the company has made significant progress in its efforts to expand its fueling network for heavy-duty hydrogen trucks. Aiming to be one of the leading producers of hydrogen-powered electric trucks, the company plans to tap into this segment under the HYLA brand and will supply not only its own big trucks, but also those of its competitors. “HYLA’s strategic mission at Nikola is to secure the supply of clean hydrogen and then distribute it to our customers at highly competitive prices,” said Carey Mendes, president of the company’s energy unit. “This will, of course, not only support our vehicles, but it will also support all other hydrogen vehicle manufacturers who need it in the future.” The company also recently received approval from the California Air Resources Board (CARB) for eligibility for major incentives for potential hydrogen truck buyers. If the company can instil optimism on Thursday that growth and profitability can still be achieved in the coming quarters, the stock could still find some traction to climb higher.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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